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Midterm Review

This review covers key economic concepts including marginal utility, production possibilities frontier, specialization, factors of production, elasticity of demand, economic systems, and market structures.

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Midterm Review

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  1. Midterm Review Honors

  2. The added benefit received from the purchase or use of the next unit of a product • Marginal utility

  3. What does a production possibilities frontier demonstrate? • Total production combination of any two products • The opportunity cost of increasing production of one in terms of the loss of the other

  4. The arrangement of labor so that each worker is doing fewer tasks than before: • Division of labor

  5. What does specialization lead to? • Increased productivity

  6. Where is labor bought and sold? • Factor market

  7. What is the key benefit of the free enterprise system characteristic of private property rights? • Private property can be used as collateral for entrepreneurs to qualify for bank loans to start new businesses

  8. What type of business structure has unlimited life? • Corporation

  9. The private ownership of the factors of production: • Capitalism

  10. If the price of a product increased, what would happen to the demand of those things considered its compliment? • Shift left

  11. What is the likely elasticity of demand for cocaine? • Inelastic

  12. Of what business type is double taxation is a disadvantage? • Corporation

  13. Under what conditions of demand would a monopoly be the most free to raise prices? • Inelastic demand

  14. What 4 benefits do entrepreneurs provide? • Jobs, tax receipts, products, philanthropy

  15. Which economic system, has the lowest standard of living? • Traditional

  16. Which economic system fails most to provide for the poor and sick? • Market

  17. Why would a person be unwilling to pay the same price for a second shirt, similar, but of a different color than the first? • The second shirt provides diminished marginal utility

  18. A college education is an example of: • Investing in one’s human capital • Specialization

  19. If a company that uses heavy machinery has to order more machinery to increase production, the elasticity of supply will likely be: • Inelastic

  20. The efficient use of the means of production (also referred to as the rate of production: • Productivity

  21. An assembly line is an example of: • The division of labor

  22. Explains the Law of Demand in that as the price increases for a product, many consumers will purchase similar cheaper items instead • Substitution effect

  23. When a politician proclaims support for free universal health care for all, you should scream: • TINSTAAFL!

  24. What market type is most likely to engage in acts of collusion? • Oligopoly

  25. In free market systems, individuals are largely free to buy and sell what they want. That compromise between buyer and seller wherein both benefit from the transaction is called: • Voluntary exchange

  26. What free market characteristic acts as the economic engine of the economy, creating a powerful incentive that creates new entrepreneurs seeking opportunity and success? • Profit motive

  27. Why are prices relatively low in a monopolistically competitive market? • Lots of competition with little chances to collude

  28. Why do market economic systems provide consumers with the most satisfaction? • They provide a large variety of goods and services • Competition

  29. What concept does the common retail slogan, “The customer is always right” reflect? • Consumer sovereignty

  30. What government role is being played when Congress passes a bill meant to reinforce federal Lemon Laws? • Setting legal framework

  31. What role is the govt. playing when it is enforcing anti-trust laws? • Maintaining competition

  32. Taxing the wealthy at a higher rate is an example of the govt. engaged in: • Redistributing wealth

  33. What business form accounts for over 70% of all US businesses? • Sole proprietorship

  34. Define the market wherein a differentiated product with many sellers is sold amid heavy non-price advertising: • Monopolistic competition

  35. Which business form had the disadvantage of unlimited liability and finds it most difficult to attract top personnel? • Proprietorship

  36. What is the theoretical model economists use to measure the competitive nature of real markets? • Perfect competition

  37. One partner in a partnership who’s protected from unlimited liability because she helped finance the venture, but does not take part in managing the firm is called: • A limited partner

  38. What market structure defines the women’s shoe market? • Monopolistic competition

  39. What type of monopoly is the newly created liquid memory market, a new advancement in computer technology patented by Econolabco? • Technological monopoly

  40. What happens to the market price of cars when the recession begins to recover? • Increases

  41. A firm is able to take advantage of economies-of-scale and lower its prices below what competitors can afford, forcing them out of the market. Name the monopoly type: • Natural monopoly

  42. A lawn mower, a tractor, a factory, a computer, and a drill press are all examples of: • Physical capital • Capital goods

  43. Who sets price ceilings? • The government

  44. What business form has the most control over price? • Monopoly

  45. What will the supply and demand curve look like for a product whose quantities cannot be increased? S D

  46. Why do oligopolies remain oligopolies? • Huge cost barriers

  47. Why is it easier for corporations to raise financial capital? • Likelier to get a bank loan • Can issue more shares of stock to the market • Can sell corporate bonds

  48. What is the most regulated business type? • Corporation

  49. When the price of a product increases, the demand for its substitute: Shifts right D1 D2

  50. What business form is hit with double taxation? • Corporation

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